The focus for 2013 will be on the movement of private money back into the markets. For the economy to grow at a faster rate with the fiscal cliff looming and state and municipal budgets still in repair mode, it will be the private markets that must lead the way. Total construction put in place for 2013 is forecast to be $892 billion, a solid improvement over the last few years, but still just edging out 2003 levels of construction activity.
Residential Construction Housing starts rose to 603,000 units a year as of September 2012. Single-family permits also rose to a 545,000-unit pace, or 6.7 percent, returning to levels not seen since July 2008.
Nonresidential Construction Trends and Forecasts by Sector:
• Lodging — Hotel developers will renovate before building new properties. Bank loans will be hard to justify until occupancy and room rates remain consistently high.
• Office — Through the first two quarters of 2012, the U.S. office sector has now absorbed 10.4 million square feet, 100,000 square feet less of net absorption than was generated over the first six months of 2011. (Jones Lang LaSalle, “Office Outlook United States, Q2 2012). This is not yet enough activity to compare with prerecession highs, but we expect CPIP to improve 4 percent in 2013.
• Commercial — Expect more rethinking of commercial construction space to accommodate smaller stores and combining in-store sales with online shopping. Look for increasing multiuse projects.
• Health care — New health care construction will include a growing number of renovation projects to update current facilities for modern hospital design, using more technology in the rooms as well as for improving air quality and reducing energy usage.
• Education — Significantly less funding from states for K-12 schools.
• Religious — The lending environment continues to be a challenge for many congregations.
• Public safety — Despite overcrowding in prisons, we expect public safety construction to remain slow for the next couple of years, at least with only 1 percent growth in 2013 to $10.2 billion.
• Amusement and recreation —Money for sports stadiums will be hard to find from local government investment, and banks will be reluctant to lend to anyone who couldn’t already pay for the project from cash flow.
• Transportation — This remains a strong sector for construction. CPIP is expected to grow 6 percent in 2013 to a total of $38.2 billion for the year. This is due in part to The FAA Modernization and Reform Act will provide $63.6 billion for the agency’s programs between 2012-2015.
• Communications — Growth in communication construction is being powered by an insatiable need for speed and to send and store large amounts of multimedia files over the Internet. One trend that might slow the growth in construction dollars is the trend to use mini cell “towers,” which are small, easily installed boxes that help to maxi¬mize spectrum.
• Manufacturing — Manufacturing construction is starting to make a comeback with both new growth in manufacturing output and with some companies repatriating their manufacturing capacity.
• Power-related — Power construction will continue to be one of the strongest growth sectors for construction. Worthy to note is U.S. Army Corps of Engineers has a proposal out for $7 billion in locally generated renewable energy through power purchase agreements.
• Highway — State budgets will continue